The importance of an operational efficiency strategy has never been greater. There’s no doubt about it, the current climate is difficult in which to operate. Rising costs, inflation, pandemics, recruitment challenges and even record-breaking heat are challenging businesses everywhere. In the face of this, it’s not surprising that businesses are looking at their operations and asking themselves questions about how efficient they are.

What is operational efficiency in business?

According to Investopedia, operational efficiency measures the proportion of costs incurred during an economic or financial activity, where lower costs equate with greater efficiency. With more than two thirds of businesses planning to cut costs over the next 12 months and only 30% of cost cutting programmes hitting their targets, developing your operational efficiency strategy will ensure you a greater chance to meeting your goals.

6 steps to improving operational efficiency:

1) Spend time with the front line to know what’s really happening

Senior leaders do not sit in a room plotting how to make life harder for the front line. The front line wants to do a good a job – they will tell you the things that are getting in the way of that. Those processes you implemented, designed to improve the customer journey, or minimise costs, how are they actually working?

The answer to improving operational efficiency is nearly always in the front line. Talk to them to find it. You’ll also get the added benefit of helping to improve front line engagement, showing them that you care about what they have to say.

2) Use that insight to map and challenge your processes

Once you’ve spent time with your front line, you’ll understand some of the most unnecessary and inefficient processes within your organisation. Do your processes need to be rewritten now that you have a more intimate understanding of what matters to your customers? Have your front line found quicker and more efficient ways of completing things that you hadn’t expected? Are you missing key steps in your intended journey design that you hadn’t costed or understood? Above all: are these processes helping your customers get to value (expressed in their terms) quickly and effortlessly?

3) Consider cost/benefit of certain steps in your processes

You’ll likely have a view on how much it costs to serve your customers. You may even be able to distil this down to a ‘cost per claim’ or ‘cost per acquisition’ metric at lower levels of line of business. To improve your operational efficiency, it very well may be that you’re looking for marginal gains – if there was an obvious silver bullet to being more efficient and reducing costs, you would have found it already.

It’s time to take a long hard reflective look at your key steps and stages to understand both the cost and the benefit that each stage gives you. You need cold hard data upon which you can build a valid business case.

The key to ascertaining cost is to obtain objective data:
– Speech analytics can remove human emotion from fact to give you accurate timings of how long some processes actually take
– Reporting tools can tell you how many times you’ve needed to contact a third party, and how long they took to answer
– IVR analysis will tell you how long your customers are prepared to wait before they give up
Consider the benefits of each stage of the process. Is the process satisfying a financial, regulatory or customer need? If the answer is no to all three, why are we doing it in the first place?

4) Finding the intelligent human/ automation mix

For many organisations, staffing costs are a major component of operational inefficiency. People are fantastic, but they can be expensive. On top of that, they want rich fulfilling careers, with regular pay rises and emotional and professional development. People are your most expensive channel, and as such, they are best treated as a premium service that is applied to work that a machine can’t do. Don’t forget, most customers are happy to self-serve when it’s intuitive and simple to do.

After mapping your processes, you’ll likely find human interventions where there doesn’t need to be:

– A manager manually distributing customer emails to agents
– A senior agent giving authorisation for a process that could be rules based
– An agent calling through to another department to ask them to complete a task for a customer

Replacing the transactional human involvement in these processes can not only bring the costs down, but also free up your premium resource to act like a premium resource, thinking about what they are doing and delivering the polite, empathetic and on-brand service to your customers you so crave. This will also result in a more fulfilling job role for your front line, driving employee engagement and retention.

Technology procurement and deployment need not be an overly expensive endeavour. A well-run procurement process for automation, orchestration or omni-channel capability could not only deliver you a cheaper solution than what you have today but could also open up new possibilities you have not, as yet, considered.

5) Time for customer-focussed metrics and targets?

Despite a gluttony of KPIs available to businesses, effective measurement is all too often an afterthought. The key question of ‘how will we know when we have achieved this?’ is overlooked in the rush to deliver a change or initiative.

Another fundamental question is: ‘are we measuring what really matters?’ Are we measuring the things that matter to customers or are we making life harder for ourselves by prioritising internal focussed measures? For those who still feel challenged by moving to customer-centric or purpose-based measures, remember you don’t have a business without those customers. When your competition is only a mouse-click away it’s time to discover that a focus on quality does take care of unnecessary cost.

A key challenge is that of limited MI capability. All too often, businesses revert to using metrics they can get, rather than the metrics they need. Nowhere is this more prevalent than in contact centres.

Take AHT (Average Handle Time) – it is not a measure of efficiency if it is not coupled with volume data or customer outcomes. Anyone can have a low AHT – it does not mean they are efficient if the customer must call back because they weren’t serviced properly in the first place.

6) The Human aspect

The engagement of your staff goes a long way to impacting their productivity. In fact, Gallup suggests a direct link between staff engagement and business profitability. Whilst it is not true to say that every engaged workforce is operationally efficient, it is certainly true that every disengaged workforce is operationally inefficient. The effect that low engagement has on absenteeism, staff attrition, customer outcomes and discretionary effort are well documented, all of which play a significant role in how much it costs you to do business.

Beyond engagement levels, people can impact your efficiency in many hidden ways. Relationships across departments can be subject to office politics, hindering the timely completion of work. Staff in senior roles may not possess the capability required to run an effective operation. Some staff may not possess the will or desire to change, instead preferring to do things the way they have always done.

It can be extremely difficult to objectively assess your staff. It can also be extremely difficult to invest time, effort, and money in something that may feel intangible (like staff engagement). There may be pressure to make quicker, systemic changes that drive a quick return. However, your people are the foundation upon which everything else happens.

Improving your operational efficiency strategy, in summary

Improving your operational efficiency needn’t be a costly and difficult endeavour. Invest time in objectively understanding your business, your technology, your processes and, most importantly, your people. Aim to understand the drivers of avoidable work, with the goal of setting your people up to work on value-add work by automating or removing processes. Measure the things that matter to make sure senior management clearly understand the day-to-day challenges and opportunities. And finally, seek support if you need it. Getting these steps right will mean you’re likely to be doing more meaningful and more operationally efficient work.

If you would like to find out more, please get in touch with Senior Consultant Joe Skinner at joe.skinner@davies-group.com.